ISAS Insights

In order to execute policies effectively, governments need to ensure that a policy initiative is predicated on realistic assumptions borne out by past experience, existing institutions and the structure of the economy; that it is internally consistent and cognisant of the interests and expected behaviour of different stakeholders; that the policy instruments and outcomes are measurable and directly related to desired outcomes; and that a clear framework is in place to assess outcomes and provide feedback to policymakers. This insights discusses these principles in the context of demonetisation and finds it lacking in internal consistency. It goes against the thrust of policy initiatives undertaken by the government thus far, that provided a clear indication of the direction in which the government wished to direct the economy. Demonetisation may have impaired credibility of future policy initiatives.